February 4, 2008

 

US Wheat Outlook on Monday: Up on follow-through buying; MGE leads

 

 

U.S. wheat futures are expected to start Monday's day session higher amid follow-through buying, with Minneapolis Grain Exchange March wheat seen leading the upside after hitting another new all-time high overnight, traders said.

 

Benchmark Chicago Board of Trade March wheat is called to open 8 to 12 cents per bushel higher. In overnight electronic trading, CBOT March wheat ended up 10 cents at US$9.53.

 

There wasn't too much fresh news out over the weekend, analysts said. However, it looks as though MGE March wheat has more upside potential after recently leading a rally that also pulled CBOT and KCBT wheat higher, they said.

 

MGE March wheat is feeling support from solid demand for spring wheat and from fears about tight supplies, a trader said. In overnight trading, the contract hit a fresh record high of US$14.33, exceeding the previous high of US$14.03 set Friday.

 

MGE March wheat trimmed gains after hitting its new high and closed up 12 1/2 cents at US$14.15 1/2. It would not be a surprise to see more profit-taking after recent gains, a trader said.

 

Japan, a steady buyer of spring wheat, said it has decided to raise the price at which it sells imported wheat to flour-milling companies by about 30% in April, according to a news report. The increase, which follows previous markups in April and October, is designed to pass on to flour millers the effects of sharp price increases for grain and shipping costs, the report said.

 

Wheat prices in China were little changed in the week to Monday, as trading thinned after flour mills completed stockpiling ahead of the Chinese New Year holiday, which begins on Wednesday. Wheat prices in Henan province, the biggest wheat producing region, were at RMB1,540-RMB1,560 (US$212.78-US$215.54) a metric tonne, unchanged from a week ago.

 

In other news, Jordan's Ministry of Trade and Industry said it changed the shipment dates for a tender to buy 100,000 metric tonnes of hard wheat. One shipment of 50,000 tonnes is scheduled for delivery before March 5, and the second 50,000 tonnes can be delivered from March 6 to March 20, an official said.

 

Previously, the first shipment was scheduled for delivery before Feb. 20 and the second shipment was scheduled for delivery from Feb. 21 to March 5. The tender for the wheat was originally scheduled for Jan. 30, but was moved to Feb. 5 due to snowstorms which disrupted work in Jordan.

 

There is no severely cold weather in sight for U.S. winter wheat, DTN Meteorlogix said in a forecast. Soft red winter wheat in the eastern Midwest and Delta could see moderate to heavy precipitation on Monday and Tuesday, with heaviest totals falling through the east and south, the private weather firm said. In hard red winter wheat areas of the central and southern Plains, episodes of scattered light precipitation are forecast for the next six to 10 days, the firm said.

 

CBOT bulls' next upside price objective is to push and close March wheat above strong technical resistance at US$9.66 1/2, a technical analyst said. The next downside price objective for the bears is pushing and closing prices below solid support at US$9.00, he said.

 

First resistance is seen at US$9.50 and then at Friday's high of US$9.57. First support lies at Friday's low of US$9.33 and then at US$9.25.

 

Traders are going to start looking ahead to a U.S. Department of Agriculture supply and demand report due out Friday, a CBOT floor broker said.

 

At the KCBT, bulls' next upside price objective is pushing and closing prices above major psychological resistance at US$10.00, the analyst said. The bears' next downside objective is pushing prices below solid support at last week's low of US$9.51 1/4.

 

First resistance is seen at Friday's high of US$9.97 1/4 and then at US$10.00. First support is seen at Friday's low of US$9.75 1/2 and then at US$9.65.